SINGAPORE (June 1): Goh Seok Eng and Yeo Hock Leng, executive chairman and CEO respectively of Dynamic Colours, are offering to privatise the company, which makes plastic bags and coloured plastics.
Their offer price of 22.5 cents per share is a 13.6% premium over the last traded price of 19.8 cents.
The offerors, who have secured 86.88% of the shares, explain that trading volume in Dynamic Colours has been very thin and that there’s compliance cost to deal with.
They believe that as a privately-held company, they will enjoy more management flexibility. The offer is a “unique” opportunity for minority shareholders to cash out.
For the year ended Dec 31 2019, Dynamic Colours reported revenue of US$27.4 million, up 13.6% y-o-y. Earnings surged 161.4% y-o-y to US$2.4 million.
With earnings per share of 1.56 cents for continuing operations, the offer of 22.5 cents values the company at 14.4 times historical earnings.
As at Dec 31 2019, the company’s net asset value was 22.33 cents per share. It declared a dividend of one cent.
The privatisation offer involves another listed company, Intraco, formerly the rice and commodities trading arm of the government but now focuses on plastics and fire protection services.
Intraco, which owns a 41.27% stake in Dynamic Colours, has agreed to sell its stake, and looks forward to receiving cash of $19.5 million from the sale.
Intraco, which has been trying to sell its stake in Dynamic Colours since 2018, plans to channel the cash to new investments, says CEO Nicholas Yoong.
“Backed by our stronger financial resources and flexibility resulting from the disposal, we will also use some of these resources to maximise the potential of our existing businesses,” says Yoong.
Its stake in Dynamic Colours helped put Intraco in the black in the last FY. Based on Intraco’s FY2019 Financial Statements, the proposed disposal would amount to loss on disposal of approximately $1.53 million.
“As an investment holding company, our long-term priority is to realign our portfolio, when possible, to reap long-term value for our shareholders,” says Intraco’s chairman Colin Low.
“We have been seeking to fine-tune the company’s investment portfolio and this divestment is in line with the company’s strategy to develop more synergistic businesses over time,” he adds.
Dynamic Colours last traded at 19.8 cents, up 17.7% year to date.
Intraco shares last traded at 20 cents, down 28.6% year to date.
ENDS
